Designed with scalability, stability, security and resiliency as the main design features, our platform works with existing technology to speed the quote-to-issue lifecycle and improve operational efficiency.Learn More

Designed with scalability, stability, security and resiliency as the main design features, our platform works with existing technology to speed the quote-to-issue lifecycle and improve operational efficiency.Learn More

How Insurtech Helps Build Customer Trust in an Age of Uncertainty

The
insurance industry was built on mutual trust. Insurance companies
trusted their insureds to give truthful accounts of losses and the
events that caused them, and insureds in turn trusted their insurance
company to pay what was owed under the terms of the insurance contract.

The ability to gather and parse
massive amounts of data, however, has changed the way insurance
companies and their customers regard the trust relationship, Wilds Ross at KPMG says. Available data can now help insurance companies create personalized coverage for each customer, but it can also raise doubts in customers’ minds as to how that information is protected and used.

Here, we explore some of the biggest
trust hurdles to arise in recent years and how insurtech is poised to
address the twin issues of privacy and transparency in order to rebuild
trust.

A Crisis of Trust?

Customers are pretty evenly split as to their trust in insurance companies, according to data journalist Paul Hiebert.
Forty-seven percent of Americans say they trust insurers, and 43
percent say they do not. There’s a clear generational trend, as well,
with a greater lack of trust in customers younger than 55. Further, only
42 percent of people agree that insurance companies act in the best
interests of their customers.

As a result, many people are choosing
to go without insurance rather than work with an insurance company they
don’t trust. For instance, 83 percent of California homes lack
earthquake insurance, financial columnist Liz Pulliam Weston writes,
in part because customers don’t trust that available earthquake
policies will come close to addressing their needs after a catastrophe.

Insurtech startups are sensitive to the atmosphere of mistrust and are capitalizing on it, say Jagdev Kenth and Grace Watts at
Willis Towers Watson. For instance, German startup Friendsurance uses
the trust built in a peer group to take a sharing economy approach to
insurance. Meanwhile, Lemonade publishes its flat fee of 20 percent of
premiums and its donation of unused money to charity each year.

“We have been giving insurance a free pass for way too long,” says Sophie Grønbæk,
co-founder and CEO of insurtech startup Undo. “The products are
confusing, which means that customers are completely dependent on the
insurance company.”

The power to change this relationship
— and the atmosphere of suspicion it has created — lies with insurance
companies, and insurtechs are taking an early lead. “The insurtechs can
use their cost efficiencies to provide bespoke policies that create an
intimacy with a customer and that, in turn, builds trust,” says Etherisc
co-founder Stephan Karpischek.

Yet the use of technology for its own sake creates additional uncertainties, particularly when it comes to privacy.

The Links Between Privacy, Transparency and Consumer Trust

“Consumer trust in insurance has been
badly hit by distrust of financial services following the banking
crisis,” Fairer Finance’s Melissa Collett says.
This mistrust sprang from countless stories of people losing their
homes and life savings — a catastrophe which, in turn, sprang from a
lack of privacy and transparency in the financial industry.

The mistrust spillover carries with
it the same concerns in customers’ minds. Can insurance companies be
trusted to keep their information safe, particularly in a world where
identity theft and digital compromise is rampant? What are insurers
doing with their information — and their hard-earned premium dollars —
anyway?

While state and federal regulations
set the bar for privacy in many ways, insurance companies that rely
solely on regulations for guidance often find themselves at a loss,
entrepreneur Jason T. Andrew notes.
Since lawmaking tends to lag behind the rise of the social problems it
addresses, concerns about data breaches and identity theft are already
common — and customers want to see every business, including insurers,
taking a proactive approach.

Even insurance companies with a
strong commitment to privacy, however, may not be able to build trust on
that commitment alone, particularly if it is not communicated or
demonstrated clearly.

Customers want to know how, where,
why and with whom their information is shared. Thus, the shift to a
customer-focused model has started to encourage transparency among
insurance companies, consultant David Cabral says. Transparency sells, which means customers are hungry for it.

Yet when it comes to implementing
transparency, many insurance companies find themselves with little
regulatory guidance. “Consumer protection in most domains of financial
regulation centers on transparency,” University of Minnesota Law School
professor Daniel Schwarcz noted in a 2014 article for the UCLA Law Review.

Insurance companies, however, are an
anomaly: State regulations of insurers typically don’t address
transparency at all. Where transparency regulations exist, they’re often
misguided or poorly written, which can make consumer trust issues
worse.

Building transparency and the trust
that comes with it, then, lies in the hands of insurance companies
rather than in the regulatory power of the state. And as Risk
Cooperative founder and CEO Dante Disparte writes, insurtech ventures are demonstrating technology’s myriad opportunities to build that transparency.

Building Trust Through Technology

Technology alone won’t solve the
trust problem. Far from being neutral or disinterested, algorithms have
been found to replicate societal biases in everything from job
recruiting to evaluating parole requests, FiveThirtyEight’s Laura Hudson reports.

Meanwhile, interactive voice tools
like Google Duplex have been criticized for misleading customers who
believe they’re talking to a human, reporter James Ball points out.

Instead, insurance companies seeking
to build trust with customers — and to rely on their own ability to
trust those customers in turn — will need to apply technological
solutions thoughtfully to their current processes in order to produce
results consistent with their own visions, missions and goals.

“Gathering data is only beneficial to
insurance companies insofar as it raises the profit/policy ratio or
increases the overall policies sold rate,” writes Sureify CEO Dustin Yoder, arguing in favor of a well-thought-out approach to customer privacy and transparency.

Cake & Arrow’s Christina Goldschmidt suggests
that to improve customer trust relationships, insurers could learn from
the application of ecommerce tools in the retail sector. By using tech
tools like a SaaS platform to establish consistent workflows, enable
customization, build a more interactive marketing approach and protect
customer information within a de-siloed company, insurers can make it
easier to provide trustworthy service and to gather trustworthy data.

Building trust with customers is a multi-step process that technology can facilitate, says Alex Schmelkin, also at Cake & Arrow. For instance, tech tools can make it easier to allow customers to interact with the company via their preferred channels;
help insurance company staff stay on track with the company’s goals;
and incorporate new products, services and tools in order to provide a
better customer experience.

The single best step may be to talk
more about customers and less about tech. By focusing on words like tech
and digital, companies are focusing on the tools, not the customers,
says Zaid Al-Qassab, chief brand and marketing officer of telecommunications group BT.

“Write a brief that’s about your
customer and business results you hope to achieve,” Al-Qassab says.
“Let’s talk about target audience and how to sell to them” — and how to
leverage technology to do so in a trustworthy fashion.